Aussie, Kiwi, Asia-EMFX rally; Wall Street stocks climb

Summary:

The Dollar Index, a popular gauge of the Greenback’s value against a basket of 6 major currencies eased in subdued trade to 105.05 (105.08 Friday). Pre-weekend positions adjustments drove currency trade.

Against the Japanese Yen, the US Dollar (USD/JPY) tumbled 0.53% to 146.98 (147.80). Risk aversion due to the weakening Chinese Yuan saw demand for the haven sought Japanese Yen.

The Greenback soared against China’s Offshore Yuan (USD/CNH) to 7.3650 from 7.3350. A narrowing of China’s Trade Surplus on softer demand for exports weighed on the Yuan and risk appetite.

The Euro (EUR/USD) rebounded to finish at 1.0715 from Friday’s 1.0695. The shared currency finished near its overnight peak at 1.0720 supported by short covering. Sterling (GBP/USD) edged higher to 1.2490 from 1.2470.

Antipodean cousins the Aussie and Kiwi advanced against the broadly weaker US Dollar. The AUD/USD pair climbed 0.29% to 0.6390 from 0.6370. The Kiwi (NZD/USD) rallied to 0.5895 (0.5880).

The Greenback dipped against the Asian and Emerging Market currencies. Against the Singapore Dollar the Greenback slid to 1.3650 from 1.3670. USD/THB (Dollar-Thai Baht) eased to 35.65 (35.75).

Bond yields were mixed. The US 10-year treasury rate settled at 4.26% (4.24%). Germany’s 10-year Bund yield finished flat at 2.61%. The UK 10-year Gilt yield was unchanged, at 2.61%.

Wall Street stocks climbed, finishing with modest gains. The DOW finished advanced 0.2% to 34,500 (34,440) while the S&P 500 rallied 4,460 from Friday’s open at 4,450.

Economic data released on Friday saw Japan’s Current Account Surplus climb to +JPY 2.77 trillion from +JPY 2.35 trillion previously. Japanese Final GDP (q/q) slipped to 1.2% from 1.5%.

Canada’s Unemployment Rate in August was at 5.5%, matching July’s Jobless rate and better than economist’s expectations at 5.8%. Canada’s economy added 39,900 jobs, against forecasts of 18,900.

China’s CPI (y/y) dipped to 0.1% against median forecasts of 0.2%, higher than the previous -0.3%. Chinese PPI (y/y) was at -3%, matching expectations and better than the previous -4.4%.

• USD/JPY – The Dollar fell 0.53% against the Japanese Yen to 146.98 (147.80) in choppy trade Friday. Japanese officials kept up their intervention rhetoric. The Greenback traded to an overnight low at 146.96. The overnight high recorded was 147.74.
• EUR/USD – The shared currency rebounded against the Greenback, reversing 3 days of losses. At the close of trade in New York, the Euro settled at 1.0720, from 1.0695, up 0.2%. The EUR/USD pair traded to an overnight high at 1.0730 before retreating.
• AUD/USD – The Australian Dollar gained versus the overall weaker Greenback to 0.6390 against Friday’s open at 0.6370. Overnight, the Aussie Battler traded to a high at 0.6400. In subdued trade, the overnight low recorded was 0.6360.
• GBP/USD – The British Pound edged higher to finish at 1.2480 US Dollars, from Friday’s open at 1.2470. Overnight, Sterling traded to a high at 1.2500, while the overnight low recorded was at 1.2453. Sterling’s topside remained limited against the Greenback.

On the lookout:

The week ahead kicks off with a light economic calendar today.

Japan releases its Preliminary Machine Tool Orders (y/y f/c -17% from -19.8% previously – ACY Finlogix).

China follows with its August New Loans (f/c CNY 1200 billion from CNY 345.90 billion previously – ACY Finlogix), Chinese August Vehicle Sales (y/y f/c 2% from -1.4% previously – ACY Finlogix).

Italy starts off European data with its Italian July Industrial Production (m/m f/c -0.3% from 0.5% previously; y/y f/c -0.1.7% from -0.8% - ACY Finlogix).

Upcoming data in the week ahead makes it a busy one. On Wednesday (13 September), the US releases its latest CPI data.

The ECB meets on interest rates on Thursday (14 September). US data released on Thursday include August Retail Sales and PPI.

Friday sees the release of Chinese trifecta data of Industrial Production, Retail Sales, and Fixed Asset Investment.

The US is scheduled to release its Empire State Manufacturing Index and University of Michigan Consumer Sentiment Index data.

Trading perspective:

The Dollar Index eased after 8 weeks of gains. Expect more adjustments today and in the week ahead to put pressure on the Greenback.

However, firmer US bond yields will support the US currency.

With data releases picking up this week, currency volatility will remain elevated. Keep those eyes fixed firmly on the screens and tin helmets on.

• USD/JPY – The Dollar tumbled against the Japanese Yen weighed by risk aversion and a weaker Chinese Yuan. At the close of trade on Friday, the USD/JPY pair settled at 146.98. Look for immediate support at 146.80 followed by 146.50 and 146.20. Immediate resistance can be found at 147.30, 147.70 (overnight high traded was 147.74) and 148.00. Look for more choppy trade in this currency pair, likely between 146.70-147.70. Trade the range.
• EUR/USD – The shared currency rebounded to 1.0720 from 1.0695, ending 3 days of losses. On the day, look for immediate resistance at 1.0750 followed by 1.0780. Immediate support can be found at 1.0690, 1.0660 and 1.0630. Look for the Euro to trade in a likely range today between 1.0680 to 1.0740. Prefer to buy Euro dips. The specs are still short Euros.
• AUD/USD – The Aussie Battler edged higher against the broadly based weaker Greenback to 0.6390 at the New York close. On the day, look for immediate resistance at 0.6420 followed by 0.6450 and 0.6480. Immediate support lies at 0.6360 (overnight low) and 0.6330. Look for the Aussie to trade a likely range today of 0.6350-0.6450. Prefer to buy Aussie dips, the specs are still short.